A handout photograph of Serbian war crimes suspect Goran Hadzic being arrested in Fruska Gora national park, west of Belgrade. He was the last remaining fugitive sought by the UN war crimes tribunal. Photograph: Politika newspaper

The Yugoslav war crimes tribunal crowned 18 years of operations on Wednesday with the capture of the last of 161 suspects from the wars of the 1990s when Goran Hadzic, a leader of the Serbian insurgency in Croatia, was arrested by the Serbian authorities.

The arrest, two months after Belgrade captured genocide suspect General Ratko Mladic and dispatched him for trial in The Hague, marked a turning point for Serbia in seeking to put a blood-soaked, criminalised past behind it and join the European mainstream.

The arrest was also a big moment for the UN tribunal in The Hague. Every one of the 161 main war crimes suspects indicted for atrocities in Croatia, Bosnia, Serbia, and Kosovo has now been apprehended and tried or is awaiting trial.

"This is a precedent of enduring significance, not only for this tribunal, but also for international criminal justice more generally," said Serge Brammertz, the chief prosecutor at the International Criminal Tribunal for the former Yugoslavia in The Hague.

"A milestone in the tribunal's history," added Judge O-Gon Kwon, the acting head of the temporary court established in 1993 at the height of the wars in Croatia and Bosnia.

Hadzic, a former warehouse worker from Slavonia, a region in east Croatia, was a political leader of the Serbian rebellion in 1991, armed and sponsored by Slobodan Milosevic's regime in Belgrade.

He led ethnic pogroms and armed insurrection against Zagreb, after Croatia's secession from Yugoslavia in June 1991, resulting in partition of the country and the Serbian seizure of a quarter of the territory during the war. Hadzic was president of the self-styled breakaway Serbian republic in Croatia for almost two years in 1992-93.

He was indicted seven years ago and faces 14 counts of crimes against humanity and violating the laws of war for "persecutions on political, racial and religious grounds; extermination; murder; imprisonment; torture; inhumane acts; deportation; inhumane acts (forcible transfers)", according to the charge sheet.

A puppet of the Milosevic regime, Hadzic was a local leader of the campaign to expel Croats from a third of Croatia and annex the territory to a "Greater Serbia" also including half of Bosnia. The campaign ended in disaster, although today's leader of the Serbian half of Bosnia, Milorad Dodik, regularly threatens to break away and destroy the country 16 years after the war ended.

Helped by the then Serbian government, Hadzic went into hiding when indicted by the tribunal in 2004. Detectives from The Hague tracked him to his house in Novi Sad, north of Belgrade, but the authorities failed to seize him.

He was arrested in the hills of northern Serbia where he was rumoured to enjoy the shelter of an Orthodox monastery.

The most notorious of his alleged crimes concerns the murders of some 250 hospital patients in Vukovar, on Croatia's Danube river border with Serbia in November 1991. The Serbs laid siege to the town for three months, shelling it to rubble. When Vukovar fell, the patients were taken to a pig farm and murdered in what acquired infamy as the Ovcara massacre.

"Justice is slow, but achievable," said the Croatian president, Ivo Josipovic, after the arrest of Hadzic, who had worked in Vukovar before the war.

A more obscure figure than Mladic or Radovan Karadzic, the Bosnian Serb leader being tried in The Hague, Hadzic was the last of that troika whom Serbia needed to capture and extradite to secure a future as a democracy and eventual accession to the European Union.

EU and Nato leaders applauded the government of President Boris Tadic in Belgrade for delivering the last of the suspected war criminals. "This is a further important step for Serbia in realising its European perspective. We salute the determination and commitment of Serbia's leadership in this effort," said an EU statement.

"The really really major obstacles are gone," an EU official added.

The arrest and imminent transfer to The Hague improves Serbia's chances of getting a go-ahead in October or November to start negotiations to join the EU. Croatia has just completed that six-year task.

War criminals apart, Serbia's EU prospects will hinge even more greatly on settling its dispute with Kosovo, the Albanian-majority province which declared independence in 2008, but which Belgrade refuses to recognise and pledges never to give up.

The first negotiations between the two sides, mediated by the EU, opened earlier this year. After a promising start, they have just broken down. Robert Cooper, the EU official in charge, postponed a session scheduled on Wednesday until September.

Diplomats in Brussels said the talks on energy, telecommunications, and cross-border trade broke down because the Serbs would not agree to new customs stamps on Kosovo exports.

"It became clear there was no chance. It's not moving anywhere," said an EU official.

More ominously, Tadic has revived talk of partitioning Kosovo, alarming the British, European and US governments.

"One should not marvel at the idea regarding the division of Kosovo since it has been present in the Serbian public for a while," Tadic said in May, prompting a furious Kosovo response.

"On Monday, Tadic proposes Kosovo's partition, on Tuesday he talks about exchange of territories, on Wednesday he suggests creating mono-ethnic states in the Balkans," said Enver Hoxhai, the Kosovo foreign minister, last month. "The borders of the Balkans are established and stable and the issues of sovereignty and territory are closed."

Last week in Croatia William Burns, the US under-secretary of state, sent a strong signal to Tadic. "Serbia faces unique challenges in joining the EU. Serbia needs to find a way to come to terms with the reality of Kosovo," he said.

"There is simply no possible way for borders in this region to be redrawn along ethnically clean lines. Any rhetoric calling for the partition of Kosovo will not advance Serbia's strategic goal of European integration."

On Monday, David Lidington, the minister for Europe, said: "The frontiers in the Balkans have been drawn and there is no going back on Kosovo's independence. Regional co-operation must be addressed in the context of an accession process for Serbia and a full European perspective for Kosovo."